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Donuts, Health Insurance, and Big Businesses

Looking at the role of employers in health care under the Affordable Care Act.

Today’s New York Times takes a look at the Affordable Care Act’s provisions regarding the shared responsibility of health care between taxpayers and employers. The story claims part of the law will saddle employers with new hidden penalties. That is not that case. What it will do is help bring down health care costs and give more Americans the insurance they need and deserve.

Here are the facts:

The Affordable Care Act will strengthen our current system in which most people get their insurance at work. Under the new law, employers with more than 50 fulltime workers will not be required to offer health insurance to their workers. However, the employer will have to pay a shared responsibility fee if their employee purchases coverage through a new exchange with the help of a premium tax credit targeted toward middle to low income families. In other words, employers can’t be “free riders” and let the taxpayers pay for the cost of covering their workers.

If the insurance provided by an employer would cost workers more than 9.5 percent of their household income, that insurance is considered unaffordable and workers have a new option: purchase affordable coverage on the new health insurance exchanges, and receive a tax credit to make it easier to get the coverage they need.

Under this scenario, employers would no longer be paying to provide benefits to their employee. Instead, they would contribute up to $3,000 to help support the cost of the tax credit provided by the government.

If the employer provides no insurance at all, and any employee obtains premium tax credits through the new exchanges, the employer would pay a maximum of $2,000 per full time employee.

Whether a large business provides affordable coverage to their employees or their employees purchase coverage in the exchange, employers will make one – and only one – contribution to the cost of their employees’ health care. It’s an important provision and it ensures large employers aren’t off the hook if taxpayers are subsidizing health insurance coverage for their employees.

A good way to understand this part of the law is to think about…donuts. When the Commonwealth of Massachusetts passed its version of health insurance reform, many businesses began offering insurance to their workers. Unfortunately, employees at a chain donut shop found that they couldn’t afford the insurance they were offered. But under the Massachusetts law, they could not purchase affordable coverage in the state’s version of the exchange because their employer offered coverage.

This catch-22 left some without the affordable, quality care they need. So when it came time to pass the Affordable Care Act, we took steps to ensure that this problem would not be repeated in donut shops and other businesses nationwide by making sure workers can get care they can afford and by making sure that employers aren’t relying on taxpayers to subsidize coverage for their employees.

The bottom line is that this provision is a common-sense way to ensure more Americans have high-quality care and it’s just one of the many ways the Affordable Care Act will strengthen the health care system for all of us.